Singapore has emerged as an attractive option for setting up offshore companies in recent times. It is because of its strong financial system and stable political and economic environment. The offshore companies are entities registered in a jurisdiction separate from the home country of their investors and managers.
The Singapore offshore company is a simple setup that benefits any business activities in this country. It is tax-efficient, straightforward, and easy to operate in a business-friendly and conducive environment.
Here’s a guide outlining the benefits of establishing a Singapore offshore company and a tailored incorporation checklist for offshore entities in Singapore.
What is a Singapore Offshore Company?
The offshore companies in Singapore refer to Singapore-incorporated companies legally exempted from paying any corporate tax in this country. The Inland Revenue Authority of Singapore (IRAS) follows a territorial tax system, taxing companies based on where their profits are generated rather than their place of incorporation.
A company generally qualifies for legal tax exemptions in this country if it fulfills the following conditions.
- There were no business activities carried out in Singapore throughout the financial year.
- The management and employees overseeing and executing contracts were not based in Singapore.
- Additionally, income and profits were neither earned nor sent to Singapore.
Scope of Business Activities in an Offshore Company
Singapore offshore companies can conduct various activities upon meeting company registration requirements. The business operations of your offshore company in this country may differ from those of its parent company.
However, certain activities may require special licenses when establishing an offshore company in Singapore. For instance, opening a restaurant necessitates regulatory approval, as do financial services.
During the offshore company setup in Singapore, briefly describe your business activities. Ensure a clear understanding of the business activities intended for your offshore company in Singapore.
Singapore Offshore Companies Incorporation Checklist
Below, we have listed some of the important requirements you must adhere to for the entire incorporation process for your offshore company in this country.
- ACRA must approve the proposed company name before incorporation.
- You have to fulfill the requirements of the local director.
- Minimum of one local resident director
- Any number of additional local or foreign directors can be appointed.
- Directors must be natural persons and above 18 years of age.
- A minimum of 1 and a maximum of 50 shareholders are required. The shareholders and directors can be the same or different persons.
- A local resident and qualified company secretary is required. A sole director/shareholder cannot act as the company secretary.
- A minimum paid-up capital of S$1 is required, with no authorised capital necessary.
- The company must possess a local registered address. It can be commercial or residential, with PO Boxes being prohibited.
- Engaging a professional firm is necessary for registering a Singapore offshore company. The law of this country prohibits foreign individuals or entities from self-registering.
- The documents required for incorporation of offshore company in Singapore
- Proposed shareholder’s and director’s Passport copies and residential address
- Details of the parent company if the shareholder is a corporate entity
- Your offshore company may need to register for Goods and Services Tax (GST) in Singapore.
- Depending on your business’s nature, you may need a business license if you intend to operate in Singapore. These licenses must be acquired from the relevant government agencies post-incorporation but before commencing business operations.
- You can manage your Singapore offshore company from overseas without relocating. If you choose to move to Singapore, you’ll need an Employment or Entrepreneur Pass.
When to Consider Offshore Company Incorporation in Singapore?
Business Expansion
Owners may contemplate establishing an offshore company as a firm grows, garnering more investor interest and shareholder support. Offshore incorporation can facilitate global expansion and optimize tax structures. Evaluating the advantages of offshore incorporation aligns with the firm’s growth trajectory and investor preferences, offering potential benefits in terms of asset protection, tax efficiency, and international business operations.
Retaining Assets to Gain Higher Income
Companies vary in their models or structures, with some primarily engaged in investment holding, a common scenario in real estate. Holding assets, such as property, often aims to generate additional income or serve as investments.
Setting up an offshore company in Singapore is advantageous, as it offers substantial exemptions from Stamp Duty and Capital Gains Tax. This makes it an attractive option for businesses with investment-focused activities like real estate.
Intellectual Property Development
Singapore offers top-notch protection for intellectual property, making it ideal for businesses planning to use their creations internationally. As one of the most competitive nations globally, Singapore’s appeal for setting up an offshore corporation is clear. It is particularly for foreign business owners seeking a favorable operating environment.
What Tax Insights Should Offshore Company Owners Be Aware Of?
Your new offshore company in Singapore may qualify for tax exemptions if specific criteria are met, such as:
- Maintaining legal control outside the country
- Refraining from conducting business
- Banking activities within the country
Singapore operates on a territorial tax system, where taxes are levied solely on income generated within Singapore (known as capital gains tax). An offshore company in Singapore is exempt from zero corporate tax if it is managed from abroad, lacks a local corporate bank account, and operates solely overseas.
Despite enjoying zero corporate tax, these jurisdictions are not classified as “tax havens.” This is because companies are subjected to stringent accountability, due diligence, and reporting standards.
Each company registration undergoes a Know-Your-Customer (KYC) process to ensure that all incorporated companies and financial transactions in the country are legitimate and not associated with suspicious activities.
Benefits of Offshore Company Incorporating in Singapore
Some benefits of offshore company incorporation in this country are as follows:
Business Friendly Environment
Singapore holds a top position in global rankings for business-friendly environments. The country’s political and economic stability and streamlined incorporation process for offshore companies make business in Singapore seamless. The local government’s pro-business approach facilitates convenient access to your business’s administrative support and public services.
Ease of Incorporation
Incorporating your offshore company in Singapore is remarkably simple. The process is direct, involving obtaining name approval and applying for incorporation. It usually takes 1-2 days before commencing business operations.
Reduction in Tax Liabilities
Singapore boasts one of Asia’s lowest standard corporate tax rates, standing at just 17%. So, establishing an offshore company in this country can enhance tax efficiency for your business.
Additionally, the goods and services tax is merely 9%, offering flexibility within Singapore’s tax system to maximise benefits, which becomes increasingly advantageous as your business expands.
Singapore tax authorities adopt the single-tier tax system. Under this system, no extra tax is added when companies pay shareholders dividends. Shareholders receive their dividends without having to pay any extra taxes on them.
Foreign Ownership Policy
Setting up an offshore company in Singapore is notably easier due to its allowance of foreign shareholders. Some companies can have up to 100% foreign shareholding, including foreign corporate bodies like corporate trustees, offering flexibility and accessibility in ownership structures for offshore entities.
Company’s Credible Status
Singapore is recognised as a global financial hub for its business-friendly environment. It has birthed numerous successful enterprises, making it an attractive investment destination. Having a Singapore offshore company enhances your company’s credibility, garnering trust from businesses globally and positioning it favorably for international partnerships and collaborations.
Banking Facilities
Opening a business bank account is crucial in establishing an offshore company in Singapore. Renowned for its banking and fintech expertise, this country provides a plethora of banking options.
Moreover, certain banking providers enable you to open a Singaporean business bank account remotely from any location worldwide. It is further facilitating the incorporation process and expanding accessibility to international clients.
Strong Economic Fundamentals
During the global pandemic, Singapore continues to shine as one of the world’s strongest economies. With low corruption rates and transparent governance, backed by solid monetary and fiscal policies, Singapore is considered a low-risk economy.
A recent noteworthy move by the Monetary Authority of Singapore to tighten monetary policy illustrates this commitment to ensuring stable economic growth and preventing inflation of the Singapore dollar post-COVID-19. Moreover, Singapore boasts the highest gross domestic product (GDP) in the region compared to its neighboring countries.
Cons of Establishing an Offshore Singapore Company
- Anonymity: An offshore company in Singapore engages in a lot of transparency as compared to other Offshore jurisdictions. BVI Company Incorporation and Seychelles Company Incorporation will be more suitable for investors seeking anonymity.
- Not eligible for buying, leasing, or renting a property within this country: An offshore company in Singapore cannot purchase, lease, or rent property within the country. Operating in Singapore may result in losing its offshore status and subject it to Singaporean corporate tax.
Steps to Register for Singaporean Offshore Company
Keep in mind the following prerequisites for creating an entity:
- After collecting all required documents, you can initiate the registration process for the offshore company in Singapore.
- Before proceeding, ensure you have a ‘consent to act’ document from both the directors and the company secretary.
- Once prepared, your registered filing agent will submit all necessary paperwork to ACRA.
- The incorporation procedure is conducted online and typically concludes within 1-2 days.
- You will receive your business license and the company’s profile upon completion.
Process of Setting of Singapore Offshore Company
Below are the essential steps for setting up an offshore company in Singapore:
- Name of the company: The name must adhere to legal guidelines, ensuring it’s unique, non-offensive, and doesn’t conflict with any existing company or Singaporean government agency. Subsequently, it will be publicly available on the government’s company registrar.
- Company Profile Submission: Determine the offshore company structure, such as sole proprietorship, private limited liability company, subsidiary, branch, or representative office. Understand the distinctions between a branch and a subsidiary office to select the most suitable option for your future endeavors.
Following the formation of your offshore company, here are the next steps to take:
- Documents may be required further for submission by the registered filing agent after company registration.
- The process is entirely online and can be completed digitally on the Singapore government’s website, BizFile+.
- To set up an offshore company in Singapore, you must have a SingPass, which is assigned to residents and citizens. It is used to access the BizFile+ website.
- Upon approval of the incorporation, you will receive a Unique Entity Number (UEN) serving as your new company’s identification number.
Besides, you also need to register with other authorities, such as:
- Register for Singapore Goods and Services Tax (GST) or value-added tax.
- Register for the Skills Development Levy (SDL) to pay taxes related to hiring employees.
- Apply for necessary business licenses based on your business operations.
- Open a corporate bank account.
- Register for the Central Provident Fund (CPF).
Meeting Compliance Requirements for Your Offshore Singapore Company
The offshore Singapore company must meet local reporting standards to ensure legal compliance. This entails meticulously recording all financial transactions and preparing comprehensive annual statements. Filing annual tax declarations is pivotal for retaining coveted tax exemptions.
Moreover, companies must adhere to the mandate of retaining financial records for at least 5 years. By diligently following these guidelines, offshore companies uphold their legal standing and ensure smooth operations within the Singapore tax framework. It fosters trust and stability in their business endeavors while leveraging the benefits of operating within the country’s robust financial ecosystem.
Conclusion
Setting up a Singapore offshore company has many advantages, including:
- Tax savings
- A friendly business atmosphere
- Access to excellent banking services
By following the rules and registering properly, businesses can enjoy Singapore’s stable political and economic conditions. This makes it a great choice for expanding globally and protecting assets.
FAQ's
- Every company incorporated in Singapore, including offshore ones, must submit an annual income tax declaration. During tax filing, an offshore company will declare its income as exempted.
- There are approximately 17,000 foreign companies in Singapore.
- If a Singapore offshore company is managed from abroad, it doesn't require a local corporate bank account. And if it operates solely overseas, it won't have to pay any corporate tax.
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